Sen’s take on wheat & rice futures to decide FDI’s future on commexes

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May 01, 2007, 03.55 AM IST

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NEW DELHI: The government is unlikely to come out with new FDI norms for commodity exchanges before receiving the final report on wheat and rice futures from the Abhijit Sen committee. Addressing a press conference in New Delhi on Monday, NCDEX managing director P H Ravikumar said there is high political sensitivity surrounding commodity exchanges right now. “Therefore, the new norms on FDI may be delayed till wheat and rice futures receive the all-clear. We are still waiting,” he said.

Both NCDEX and MCX have been receiving overtures from foreign exchanges such as ICE and FIIs such as Goldman Sachs and Fidelity for picking up equity in them. However, no new deal is possible till the government announces shareholding norms for exchanges. According to Mr Ravikumar, the Abhijit Sen committee is expected to submit its report by end May.

Meanwhile, NCDEX is pushing for allowing mutual funds and banks to trade on local exchanges. “We are optimistic that financial institutions, mutual funds and banks would be allowed to start hedging on commexes within the next four to six months. The Forward Markets Commission is fully supporting it. But we want to see if it can be done even faster,” he said.

Reacting to the credit policy, Mr Ravikumar said the RBI has not been fair to Indian companies by permitting banks to hedge overseas but not on Indian exchanges. “Domestic companies should also be allowed to hedge on local commexes through banks the same way they are permitted to do it overseas. Customers should be given a choice on where to hedge,” he said.

In his view, by allowing large PSUs such as STC, MMTC and PEC to hedge on the market, the government seeks to deepen the market. The move will introduce volumes and stability in the commodity markets.

“We all have seen how LIC and UTI make purchases when the stock market is under pressure or how the State Bank of India has intervened in the past to keep the rupee steady. In the same way, these large PSUs can buy/sell on either side to prop up the market or cool it down in commodities. Similarly, FCI can do reverse auctions on the exchanges to procure wheat," Mr Ravikumar added.

On the issue of a common regulator for commodity exchanges and stock exchanges, Mr Ravikumar said it appears unlikely in the short term. “The FMC has done tremendous work within the powers it has. We see it continuing to remain very strong for the next 7-8 months at least,” he said.